The committee adopted a new proposal that would require special districts to present their annual budgets or any new fee increases to their local fiscal court. But the compromise on House Bill 1 does not allow the fiscal court veto or approval powers of the special district's actions, as Senate Republicans had recently suggested.

Special taxing districts are usually sewer districts, library boards or other quasi-governmental public service entities. In November, the auditor's office released a report that said half of Kentucky's special taxing districts aren't following rules on filing budgets or submitting audits. But those districts, the report said, spend more money than Kentucky spends on Medicaid or infrastructure.

The compromise is supported by Republican state Sen. Damon Thayer and Auditor Adam Edelen, as well as many Democratic lawmakers. Edelen says the change will help transparency of the districts.

"I think what's important to note is that requiring any entity that wants more money to have a public hearing and them streamlining the communication between that entity and the fiscal court to me only improves the transparency we already had in place in this bill so I welcome it," Edelen said.

Thayer said he also supports the compromise, even if the legislation doesn't provide as much oversight as he'd like to see.

"It doesn't get me to where I want to be, but it certainly moves the ball down the field a little bit while preserving the other excellent recommendations included in House Bill 1," Thayer said.

Thayer also predicted that lawmakers will continue to look at the issue in the future, even after the legislature passes House Bill 1 this session.

Both chambers are expected to pass the conference committee report, sending the bill to Gov. Steve Beshear to be signed into law.